Correlation Between KB Financial and LAir Liquide

Can any of the company-specific risk be diversified away by investing in both KB Financial and LAir Liquide at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KB Financial and LAir Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KB Financial Group and LAir Liquide SA, you can compare the effects of market volatilities on KB Financial and LAir Liquide and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KB Financial with a short position of LAir Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Financial and LAir Liquide.

Diversification Opportunities for KB Financial and LAir Liquide

-0.7

Correlation Coefficient

KB Financial  LAir Liquide

Excellent diversification

The 3 months correlation between KB Financial and LAir is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding KB Financial Group and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA and KB Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KB Financial Group are associated (or correlated) with LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of KB Financial i.e., KB Financial and LAir Liquide go up and down completely randomly.

Pair Corralation between KB Financial and LAir Liquide

Allowing for the 90-day total investment horizon KB Financial Group is expected to under-perform the LAir Liquide. But the stock apears to be less risky and, when comparing its historical volatility, KB Financial Group is 1.0 times less risky than LAir Liquide. The stock trades about -0.07 of its potential returns per unit of risk. The LAir Liquide SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  15,654  in LAir Liquide SA on December 29, 2024 and sell it today you would earn a total of  2,939  from holding LAir Liquide SA or generate 18.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

KB Financial Group  vs.  LAir Liquide SA

KB Financial Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days KB Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, KB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LAir Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LAir Liquide SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, LAir Liquide reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Financial and LAir Liquide

The main advantage of trading using opposite KB Financial and LAir Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Financial position performs unexpectedly, LAir Liquide can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LAir Liquide will offset losses from the drop in LAir Liquide's long position.

The idea behind KB Financial Group and LAir Liquide SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.